If all the George Bush-era tax cuts are extended under the Congressional Republicans' proposal, New Jersey's highest earners would pay significantly less taxes in 2013, while middle- and low-income taxpayers would pay nearly the same amount they do today, according to an analysis today released by the Institute on Taxation and Economic Policy and Citizens for Tax Justice.
Under the Republicans' approach, in 2013, the wealthiest 1 percent of the state's residents would receive tax cuts worth $90,980 on average — or 30.5 percent of New Jersey's total cuts — while President Barack Obama's more limited extension plan would yield a $19,020 average tax cut for top earners — or 8.3 percent of the state's total cuts, the report said. The next 4 percent high earners in New Jersey would benefit slightly more under the Republicans' plan than the president's, by receiving cuts worth $11,400 on average, compared to cuts worth $10,620.
That could be good news for small-business owners, according to the Tax Foundation. At face value, Mitt Romney's plan is more business friendly, according to Nick Kasprak, analyst and programmer for the group, "but it's hard to say if he'll do what he says he'll do."
"He wants to cut commercial rates by 20 percent, but then balance it out by getting rid of some tax credits … but getting rid of them isn't easy," he said.
The Congressional Republicans would extend all of the income and estate tax cuts enacted in 2001 and 2003, but not the expansions for lower-income families that were included in the 2009 Economic Recovery Act. President Obama plans to extend the 2009 expansions, as well as the Bush-era cuts, but only for the first $250,000 of a married couple's annual earnings, or the first $200,000 of an individual's earnings. All the tax cut provisions are set to expire at the end of the year.
Though the Republicans' proposal would give New Jersey's highest earners the biggest tax cuts, Kasprak said their plan to eliminate tax on long-term capital gains, dividends and interest income for married couples with combined earnings under $200,000 and individuals with earnings under $100,000 would disproportionally benefit small-business owners.
"To the extent that small-business owners want to invest in other things to raise their capital, they don't have to pay taxes on their stock income under this plan," Kasprak said. "Because these tax cuts are targeted at people making under a certain threshold — and the bigger business you have, the more income you're going to be making — for larger businesses, it's not gonna be that big of a help."
President Obama's budget plan would cost $1 trillion less over 10 years than the Republicans' approach, the report said.